Gone West

Lost in the commotion over the Boston Marathon bombing and subsequent manhunt was an explosion at a fertilizer plant in a small Texas farm town that destroyed half the town and left hundreds of residents wondering where the safety net is that’s supposed to protect them.

Measured solely in dollars, the explosion wasn’t much of a disaster. Most estimates place damages from the explosion at around $230 million. By comparison, one month later a tornado that ripped through Moore, Okla., caused more than $2 billion in damages. But by other measures, the April 17 explosion at the West Fertilizer Company exposes what some say is a lax regulatory environment in Texas that does nothing to protect local residents and the financial nightmare than ensues when people refuse to manage their risk.

Fifteen people died, including 12 first responders, in the Sunday evening explosion at the plant in West, Texas, a town of about 2,800 people 80 miles south of Dallas. Another 200 people were injured. Some 161 homes were destroyed, 52 others had major damage and another 46 had minor damage. Three of the town’s four schools had major damage, and a nearby assisted living home and a 50-unit apartment complex were both destroyed. The blast, which generated an earthquake reading 2.1 on the Richter scale, caused major damage to the city’s underground water and sewer lines as well as an above-ground water pumping station. Damage was recorded in 37 different city blocks, and in one instant the explosion wiped 35% of the town’s property tax base off the books.

A small fire inside the plant is believed to have sparked the blast. What caused the fire is unknown, although investigators believe it could have been caused by a faulty golf cart that employees used to navigate the plant.

What is known is that around 7:30 p.m. April 17 the town’s volunteer firefighters were called to respond to a fire inside the West fertilizer plant, located outside the city limits but within a half-mile of three public schools and the city’s nicest neighborhood. The firefighters’ immediate thought was to prevent anhydrous ammonia fumes from escaping because anhydrous ammonia is toxic when inhaled.

The other danger that night was an estimated 60 tons of dry ammonium nitrate being stored inside wooden bins at the plant as well as the 100 tons being stored inside a railroad car on a nearby siding that was awaiting unloading. When mixed with the right detonator, ammonium nitrate can become explosive. Oklahoma City bomber Timothy McVeigh used it to blow up the Alfred P. Murrah Federal Building in 1995. Ammonium nitrate also caused the worst industrial accident in U.S. history, an explosion in 1947 on a cargo ship docked near Texas City, Texas, that resulted in 581 deaths.

Shortly before 8 p.m. on April 17, the ammonium nitrate at the West fertilizer plant found a detonator. The fire at the plant caused a wooden storage bin to collapse onto itself, sparking the explosion and exposing serious issues in West and throughout Texas.

The Texas House of Representatives conducted a hearing shortly after the explosion. Representatives from the four state agencies with some degree of regulatory oversight of the plant testified. They revealed that Texas does not require companies that handle hazardous materials such as fertilizer to carry insurance. In West, the plant owner carried just $1 million in liability coverage.

There is also no statewide fire code to prevent the plant—and others in the state—from storing ammonium nitrate in wooden bins. Texas also prohibits sparsely populated counties from having their own fire code. In this case, McLennan County could not have enforced a fire code if it wanted to.

The state agency officials testified that the Texas Commission on Environmental Quality last inspected the plant in 2006 after receiving a complaint about odor. No investigator had returned since then because the commission had not received any more complaints. Their testimony also revealed that Texas does not have an agency responsible for safety inspections and coordinating an emergency response among local governments. According to the state Department of Public Safety, 1,105 companies throughout Texas store ammonium nitrate.

Less Burdensome

Texas Gov. Rick Perry has made several high-profile trips to other states to recruit business to Texas. Among his messages: Texas is a business-friendly state with fewer burdensome regulations than other states. A request to Perry’s office for comment went unanswered, but in the days after April 17 he told the Associated Press that spending more state money on inspections would not have prevented the explosion. Perry said he remains comfortable with the state’s level of oversight and suggested that the majority of Texas residents agree with him.

Through their elected officials, Perry said, voters “clearly send the message of their comfort with the amount of oversight.”

But for others in the state, the blast was a wake-up call. Jim Marston, vice president of the Environmental Defense Fund’s U.S. Climate and Energy Program and regional director of the Texas office, says Texas needs to enforce tougher regulations to prevent similar disasters.

“Many things that modern states have in their regulatory program are missing in Texas, and many of those could have reduced the chances of this kind of catastrophic accident,” Marston says. “If Texas does not modernize its rules, we will continue to have a lot of people die unnecessarily because of things like this.

“There are some regulations that are so important to health and safety that you simply have to pass them. It is a balancing act, but these are not burdensome. They are basic kinds of things that a modern society has. You cannot cite a single example of somebody leaving a state because there is a state fire code. I’m sorry. That’s not burdensome.”
David Weinberg, executive director of the Texas League of Conservation Voters, would also like Texas to get tougher.

“The laissez-faire the state is taking is not an appropriate one,” Weinberg says. “Given the size and scope of the tragedy that happened and the knowledge that there are other communities in similar situations in the state, you would want to be proactive in taking steps to ensure a similar tragedy did not happen in the future instead of sort of shrugging your shoulders and saying, ‘Well, it doesn’t happen very often, and we’re generally satisfied with the regulations that currently exist.’

“Bottom line, to not do anything to improve measures within the state doesn’t seem like good policy. It seems like there is certainly more that could be done to educate Texans about where these facilities are located and what sort of proximity they have to other populated areas.”

However, U.S. Rep. Bill Flores, R-Texas, whose district includes West, says it’s too early to know what if anything can be accomplished with more regulation. He says more regulation doesn’t guarantee compliance.

“We don’t have all the facts just yet, but it does appear there are some EPA standards for storage of ammonium nitrate and that the plant was not following those standards,” he says. “So even if you have potentially a new law or a new regulation that wasn’t being followed, then an accident still potentially could happen.”

Flores agrees with the idea of creating a national directory of fertilizer plants that would help local authorities identify hazardous materials in their communities. “I’d like to see something like that,” he says, “but beyond that, it’s a little hard to know at this point what we need to do.”

Risk Management

The explosion also exposed a lack of risk management in West. The West Independent School District is the city’s largest public employer and received the most significant structural damage. Of the roughly $60 million insurance policy that the district holds, payouts are projected to be only around $25 million. The cost to rebuild, as adjusted for 2013-14, will be around $80 million to $100 million.

Of the 259 houses that were damaged or destroyed, 104 were either uninsured or underinsured. Nationally, a 2012 Insurance Information Institute poll conducted by ORC International found that 96% of homeowners had homeowners insurance. According to Marshall & Swift/Boeckh, a leader in building cost information, 61% of homes in the U.S. are undervalued by an average of 18%. However, that Insurance to Value Index has improved dramatically since the 1990s, when nearly 73% of homes were undervalued by 35%.

West mayor Tommy Muska, who happens to be an insurance salesman, said he cannot understand why so many people in West do not insure their homes.

“Being in the insurance business here for 37 years, I find that very, very unusual that that many people didn’t carry insurance,” he says. “I didn’t expect to see that number. I expected everyone to carry some. Obviously a lot of them don’t have enough insurance, I can tell you that. You know in West there are tight people around here who don’t like to let go of that money, and they try to get by with what they can. Well, it got them in the butt this time around.

“It tells me that I’m not doing my job very well. Again you can’t get blood out of a turnip. You’ve got some people who are just not going to buy insurance. I don’t have a really good answer for that number.”

FEMA Response

Two days after the Sunday evening explosion, the federal government declared West, Texas, an official disaster area. This authorized the Federal Emergency Management Agency (FEMA) to provide financial assistance. Some $16 million in grants and low- to no-interest loans from both FEMA and the Small Business Administration have been distributed to help pay for the emergency response and debris removal. However, the Obama administration has refused to declare the West explosion a major disaster that would make the community eligible for more federal assistance.

According to a statement from FEMA, Texas’s request for a major disaster declaration was denied because “there was no evidence presented that the state of Texas lacked the fiscal resources to address the remaining $17 million in estimated uninsured public infrastructure restoration costs arising from the tragic explosion in West.”
FEMA typically pays local governments 75% of costs to repair after disasters, but not always. The agency rejected a request in 2010 for millions of dollars after a gas-pipeline explosion destroyed a northern California neighborhood.

Governor Perry has appealed FEMA’s decision, and a decision was expected by the end of August. Meanwhile, Mayor Muska has a town to rebuild.

“We’re not waiting for the government,” Muska says. “I’m looking at any and all ways to get this paid for. We’ve got some money through the state of Texas—$10 million for the city of West and West ISD [Independent School District], that will probably be split 70-30 or something like that. So with that $7 million from the state of Texas we can get the pipes fixed, the sewer fixed, the water well up and running.

“We’re looking at a loan from the water commission on our sewer plant because we were in the process of expanding. That’s going to be on hold for a little bit since we’ve lost the sewer usage from that side of town, but we will be able to get the pipes in the ground.”

Congressman Flores says he will push for more federal assistance this time, but acknowledged that, in the future, homeowners who don’t insure their homes might not receive help from the government.

“You get into the moral hazard argument,” he says. “I’ve been pushing to have FEMA respond, and you hate to do that because under normal circumstances the plant owner would have carried sufficient liability coverage to deal with the exposure his operation had. The second thing that bothers me is I hate to think taxpayers have to come in and help these uninsured homeowners because you’ve got this moral hazard argument.

“We may want to modify at some time to say that, if you had the opportunity to buy coverage and you didn’t, maybe you shouldn’t get help. But that’s a different issue. That’s down the road.”

Going Forward

What’s the message from West going forward? Flores says West will return.

“This is a very hearty community,” he says. “This is grassroots America. I think they are going to put their community back together. I think it’s going to be a rough slog, but they’re going to get there.”

Marston hopes the message includes a warning.

“This is a place where we remember the Alamo,” he says. “People go and visit it and remember that people did not die in vain. We need to do that for the people in West. We can’t let this be a group of folks who died unnecessarily. We owe it to these folks to learn lessons and do better.”